Join Early Retirement Today
Thread Tools Search this Thread Display Modes
SPY DIVS and Inflation vs 'safe bonds'
Old 02-06-2011, 04:52 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 21,076
SPY DIVS and Inflation vs 'safe bonds'

A few recent threads (this, this, and this one) got me thinking more about the 'live off the dividends' approach. I did some searching, and I think I got this right, but maybe I'm slipping up on the 'inflation adjustment' or something. Anyway, I found it interesting and would appreciate verification/correction:

DATES&P500 NAVS&P500 % YLDcalc div$

That table has inflation adjusted NAVs for S&P500. I checked it against CPI numbers and a non-adjusted source, and it seems to make sense. So if (big IF) I'm reading this right, I come to this conclusion:

A person could have B&H the S&P500 in 1950, 1960, 1970 or 1980, and collected ( and spent) dividends in the 3%-7% range at that time (far above the 1.8-2% range we used in the 5 year treasury examples). Now, the yield % has gone down since then, but the NAV has gone up, so my "calc div$" column seems to show that the actual dividends received have gone up, even after adjusting for inflation. And the untouched principal has gone up, even after inflation.

Take one specific example - 1980, collect a 4.61% yield, and that dividend increases beyond inflation (at least at each decade snapshot). It's possible there were periods of time where the divs dipped below inflation, but I would think if someone was a bit more conservative and pulled 4% instead, the re-investment of the 0.61% would cover any dips.

If you started in 1970, you would have seen a small drop in divs (10%) from a starting WR of 3.49%, but they recover in following decades.

And if I go back 13 years to a time with yields as low as they are today, it still looks good today (though a slight dip in divs at year 2000):

DATES&P500 NAVS&P500 % YLDcalc div$

If this is correct, I think maybe many of us have been discounting the value of those S&P dividends.


Inflation data from: Historical Consumer Price Index
S&P price and yield data from: S&P 500 Price, Inflation Adjusted Chart
Some insight here: Political Calculations: The History of S&P 500 Dividends in Pictures
ERD50 is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Interest Rates + Inflation + Bonds = FEAR Sowhatdoidonow FIRE and Money 6 01-01-2010 06:38 AM
U.S. Bonds @ inflation zzyp FIRE Related Public Policy 48 09-20-2009 01:12 AM
Bonds vs. Inflation Mysto FIRE and Money 55 05-16-2009 05:00 PM
SP500 and SPY utrecht FIRE and Money 8 10-31-2008 11:04 AM
need help understanding divs & cap gain stats WM FIRE and Money 5 05-06-2007 12:22 PM

» Quick Links

All times are GMT -6. The time now is 07:12 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.